Decades-Long Chinese Influence in Panama Begins to Unravel

In the most recent blow to the Chinese regime, Panama announces it will not renew its Belt and Road agreement—a significant win for Trump’s pressure campaign.

About 10 years ago, Louis Sola’s family maritime business was given a concession to build a marina and cruise port on Amador, a causeway located at the Pacific entrance to the Panama Canal.

“This would have been the very first cruise port in the Pacific,” Sola, who now serves as the U.S. Federal Maritime Commission chairman, said.

Everything changed in 2017 when Panama signed on with the Chinese regime’s Belt and Road Initiative. The initiative required the Panamanian government to recognize Taiwan as part of China—much to the surprise and concern of the United States, which has positioned itself as an ally of Taiwan.

Panama then rescinded the concession on the land where the Sola family had planned to spend $30 million on a cruise port.

Instead, Panama nationalized the project, gave a concession to a Chinese company, and paid it $300 million to build the cruise port.

Additionally, the land that would have been used to build a marina was designated as an embassy of the People’s Republic of China.

Eventually, the Solas got the land back, and U.S. and domestic pressure ended the Chinese regime’s plans of building an embassy at Amador.

In the most recent blow to China, Panama’s president announced on Feb. 2 that it will not renew its Belt and Road agreement with the Chinese Communist Party (CCP)—a significant win for President Donald Trump’s pressure campaign.

Beijing’s Influence

Sola’s personal story, told during a Jan. 28 Senate Committee on Commerce, Science, and Transportation hearing, underscores what has become a hot-button topic—Chinese influence at the Panama Canal.

The 100-year-old strategic waterway, largely ignored in U.S. policy for decades, has taken center stage in growing tensions between Beijing and Washington.

Chinese infrastructure and ports on both the Atlantic and Pacific ends of the Panama Canal have some experts concerned that Beijing has de facto control of the strategic waterway, a potential violation of the U.S.–Panama Neutrality Treaty, which places U.S. national security at risk.

While military leaders have raised the alarm over the Chinese regime’s rising influence at the Panama Canal and throughout Latin America, the issue came to the forefront when incoming President Donald Trump announced on social media in December 2024 that the canal was “solely for Panama to manage, not China.”

Trump also complained that U.S. ships, which are the top users of the canal, were being “ripped off” with high fees, another potential violation of the treaty to deal with all nations fairly.

After taking office in January, Trump said the canal was being operated by the Chinese regime and vowed to intervene, prompting denials from Beijing and Panama.

“China is operating the Panama Canal,” Trump said during his inaugural speech. “And we didn’t give it to China. We gave it to Panama, and we’re taking it back.”

National Security Risk

Chinese soldiers don’t have to be on the ground for the CCP to disrupt the canal and jeopardize U.S. national security should the United States be drawn into a conflict with the Chinese regime over Taiwan, according to Andrés Martínez-Fernández, a senior policy analyst for Latin America at the Heritage Foundation.

The fact that two of Panama’s five principal ports are controlled by Hong Kong-based CK Hutchison Holdings—at Balboa on the Pacific side and at Cristóbal on the Atlantic side—is a significant concern for some analysts.

Equally worrisome, in 2018 a Chinese consortium headed by China’s state-owned China Harbour Engineering Company and China Communications Construction Company was awarded a $1.4 billion contract for the canal’s fourth bridge.

“The canal is very vulnerable to any kind of sabotage,” Martínez-Fernández told The Epoch Times. “We’re not talking a [Chinese] warship in order to do that.”

The canal has both economic and military significance for the United States because it represents a strategic chokepoint, making it a critical pathway for U.S. warships in the Atlantic and Pacific oceans in the case of military conflict with the Chinese regime.

Some $270 billion of cargo passes through the canal each year, amounting to 5 percent of global maritime trade volume. More than 70 percent of that transits to or from U.S. ports.

The United States handed sovereignty of the Panama Canal to Panama on Dec. 31, 1999, under a treaty signed in 1977 by President Jimmy Carter.

The agreement included the Neutrality Treaty, in which the United States retained the right to use military force to secure the canal from foreign aggression or threats to its neutrality.

For Panama, the canal is part of its national identity and its biggest moneymaker, generating some $28 billion for the country over the past 25 years, according to Panama.

Panamanian President José Raúl Mulino said on Jan. 30 that it would be “impossible” to return the canal to U.S. control and that Panama could not arbitrarily remove concessions from companies linked to China, referring to the Hutchison ports.

However, Panama announced in January that it is auditing the Chinese port concessions.

Panama Ports Co., controlled by CK Hutchison Holdings, was notified of an audit shortly after Trump’s accusations that the CCP controls the waterway, according to the Panama Maritime Authority.

Martínez-Fernández said he believes the most likely diplomatic solution to the U.S. concern over national security will be to reduce Chinese presence along the canal and ports.

“These investments in this infrastructure from China, around the canal, around other parts of the region, the Caribbean, and South America just raise a lot of red flags,” he said.

Meanwhile, the Chinese regime has publicly supported Panama’s ownership and control of the canal, playing on Panama’s national identity and sovereignty to strengthen its political foothold.

Wang Yi, Chinese state councilor and CCP foreign minister, called Panama a “friend and good partner” during a 2021 phone call with Erika Mouynes, the Panamanian foreign minister.

Yi stated that China would “continue to support Panama’s efforts to defend its legitimate rights and interests on the international stage, including Panama’s sovereignty over the canal.”

Neutrality Issue

When flying into Panama, billboards advertising the Bank of China greeted visitors until recently.

According to residents in Panama who spoke with The Epoch Times, the billboards were taken down right before U.S. Secretary of State Marco Rubio met with Panama’s president on Feb. 2.

The billboards highlight Beijing’s influence in Panama, and Trump, in a post on social media shortly before Rubio’s visit, said Panama was attempting to take down 64 percent of signs written in Chinese.

“They are all over the [Panama Canal] Zone because China controls the Panama Canal,” Trump stated on Jan. 28. “Panama is not going to get away with this!”

Although Panama decided not to renew its Belt and Road agreement with China directly after Rubio’s visit, the fact remains that two of Panama’s key ports are controlled by a Hong Kong-based company.

CK Hutchison Holdings first won a bid to operate those two ports in 1997, but since then, Beijing has cracked down on the city’s independence and brought it firmly under the communist regime’s control.

The Hutchison ports have become the focal point of U.S. concern, along with state-run Chinese businesses that are constructing a fourth bridge over the canal.

That is because the CCP mandates that Chinese companies cooperate with state intelligence agencies.

Yet the CCP appears to have gained a foothold without significant investment in the ports.

While speaking before the Senate committee, Sola said that while Panama’s Chinese ports have contributed nothing over the past 25 years, they have continued to operate the Balboa and Cristóbal ports.

“I don’t understand why Panama would allow those two ports to operate and put the operations that they have in the canal in jeopardy,” he said.

Sola said the Hutchison ports are given a special permit to operate because directing ships into or out of their ports blocks the canal’s traffic when ships maneuver to dock.

Also troubling for senators was that Panama renewed concessions to the Hutchison ports in 2021 for another 25 years without a bid. Sola told senators that the ports agreed to pay back taxes of $150 million as part of the deal.

“We can get into the semantics of the Port Authority versus the control, but operational control of the Panama Canal is real—by the CCP,” Sen. Eric Schmitt (R-Mo.) said.

Schmitt has introduced a resolution calling on Panama to terminate Chinese management of key Panamanian ports.

Potential Violation

Eugene Kontorovich, professor at George Mason University’s Antonin Scalia Law School and senior research fellow at the Heritage Foundation, testified before the Senate Commerce Committee on Jan. 28 that Panama has potentially violated the Neutrality Treaty with the United States by allowing the Chinese to operate the ports.

Kontorovich said the treaty prohibits “foreign operation” of the canal. The degree of CCP control and involvement with the Chinese companies operating the ports would need to be investigated to determine if a violation occurred, he said.

“One need not wait until the canal is actually closed by some act of sabotage or aggression, which, as we heard from the testimony, would be devastating to the United States,” he said.

Kontorovich said the treaty allows for the United States to “defend the canal against any threat to the regime of neutrality. ”

While the Panama Canal Authority (PCA) controls the operation of the canal, the Panamanian government has administrative power over the nation’s ports, water rights, and ship registry, according to the Federal Maritime Commission.

However, some are concerned that the Chinese port operation combined with the construction of a fourth bridge across the canal by state-owned Chinese companies could be used to block the vital chokepoint should conflict erupt.

“Chinese companies are building a bridge across the canal—at a slow pace so as to take nearly a decade—and control container ports at either end,” Sen. Ted Cruz (R-Texas), chairman of the Senate Commerce Committee, said.

“The partially completed bridge gives China the ability to block the canal without warning, and the ports give China ready observation posts to time that action. This situation poses acute risks to U.S. national security.”

Influence or Control?

Nehemías J. Jaén Celada, a public policy expert, has had extensive dealings with the Chinese regime as a former Panamanian diplomat to China.

While Beijing has plenty of influence in Panama, Jaén said he does not believe that amounts to a treaty violation, adding that he does not see legal grounds for Washington to take back the canal.

When then-Panamanian President Juan Carlos Varela decided to cut ties with Taipei in 2017 to sign on with the Chinese regime’s BRI, he did so thinking that the move would attract significant Chinese investments, Jaén said.

“I can tell you, there is no such … thing as a huge [Chinese] investment in the country,” he told The Epoch Times. “That never happened.”

Chinese companies are bidding for projects and offering services, but that is not the same as investing in Panama, Jaén said.

Panamanians see the Panama Canal as part of their identity, so Jaén said he believes Trump’s threats to take control served as a broader national security strategy called “near security.”

“So what it means is all the realms, like trade, economics, finance, manufacturers—all these realms are superseded to the U.S. national security,” Jaén said.

“The main goal for Trump is just to make sure that the influence and the presence of China do not expand.”

Jaén said that overall, Chinese influence has been waning since Panama’s copper mine was shut down for environmental reasons.

He noted data that show China ranked first from 2021 to 2023 in terms of Panamanian exports during copper mine activity but dropped to fourth last year.

Jaén said he believes that the United States also wants to prevent the Chinese regime from participating in an ambitious railway project to connect Panama City to the city of David, which borders Costa Rica.

Espionage and Sabotage

Part of the concern for senators is the CCP’s penchant for spying on the United States and known cyberattacks launched by Volt Typhoon, a Chinese state-sponsored hacker group. The United States and its primary global intelligence partners, known as the Five Eyes, issued a warning on March 19, 2024, about the group’s activity targeting critical infrastructure.

Schmitt noted during the hearing that the Chinese-made cranes used in shipping are susceptible to hacking.

“China’s state-owned ZPMC, which supplies 80 percent of U.S. port cranes, has equipped their cranes with cellular modems that create exploitable vulnerabilities,” he said.

Sen. Tammy Baldwin (D-Wis.) said the CCP’s ability to conduct surveillance through its infrastructure projects makes the fourth bridge being built by the Chinese across the canal problematic.

“It’s essential to have a secure and level playing field, which we currently don’t,” she said. “Chinese current practices do not allow for that.”

U.S. Southern Command is concerned that surveillance could be conducted from the fourth bridge over the canal, which includes a light rail system, according to testimony at the hearing.

The PCA is responsible for the transit, shipping locks, and movement of vessels within the Panama Canal waters, along with the safety of the canal.

The agency inspects projects within its jurisdiction, such as the fourth bridge across the canal, to ensure compliance with requirements, according to Ilya Espino de Marotta, Panama Canal deputy administrator and former executive vice president of engineering and program management for the PCA.

And while it does not control the ports outside the canal, it can deal with emergencies that may block canal traffic with specialized equipment and trained ship operators, she told The Epoch Times.

While no major security issues have occurred over the past 30 years, the agency has floating cranes and a fast response team ready to handle such situations as a ship that is disabled or stuck in the canal.

The canal’s operation has been modernized with computers that run its operations, but it can be operated manually in an emergency, Espino de Marotta said.

PCA safeguards the canal and its infrastructure through collaboration with the U.S. Department of Homeland Security, she said.

Three years ago, PCA began working with the U.S. Cybersecurity and Infrastructure Security Agency—part of the Department of Homeland Security—to guard against cyberthreats to the canal, she said.

Darlene McCormick Sanchez is an Epoch Times reporter who covers border security and immigration, election integrity, and Texas politics.

Reprinted with permission from The Epoch Times – By Darlene McCormick Sanchez

The opinions expressed by columnists are their own and do not necessarily represent the views of AMAC or AMAC Action.